Why Having a Financial Professional Matters

What kind of role can a financial professional play for an investor? The answer: a very important one. While the value of such a relationship is hard to quantify, the intangible benefits may be significant and long lasting.

A good financial professional can help an investor interpret today’s financial climate, determine objectives, and assess progress toward those goals. Alone, an investor may be challenged to do any of this effectively. Moreover, an uncounseled investor may make self-defeating decisions. Some investors never turn to a financial professional. They concede that there might be some value in maintaining such a relationship, but they ultimately decide to go it alone. That may be a mistake. 

No investor is infallible. Investors can feel that way during a great market year, when every decision seems to work out well. In long bull markets, investors risk becoming overconfident. The big-picture narrative of Wall Street can be forgotten, along with the reality that the market has occasional bad years.  This is when irrational exuberance creeps in. A sudden market shock may lead an investor into other irrational behaviors. Perhaps stocks sink rapidly, and an investor realizes (too late) that a portfolio is over weighted in equities. Or, perhaps an investor panics during a correction, selling low only to buy high after the market rebounds.

Often, investors grow impatient and try to time the market. Poor market timing may explain this divergence: according to investment research firm DALBAR, the S&P 500 returned an average of 8.91% annually across the 20 years ending on December 31, 2015, while the average equity investor’s portfolio returned just 4.67% per year.1            

The other risk is that of financial nearsightedness. When an investor flies solo, chasing yield and “making money” too often become the top pursuits. The thinking is short term.

A good financial professional helps a committed investor and retirement saver stay on track. He or she helps the investor set a course for the long term, based on a defined investment policy and target asset allocations with an eye on major financial goals. The client’s best interest is paramount. As the investor-professional relationship unfolds, the investor begins to notice the intangible ways the professional provides value. Insight and knowledge inform investment selection and portfolio construction. The professional explains the subtleties of investment classes and how potential risk often relates to potential reward. Perhaps most importantly, the professional helps the client get past the “noise” and “buzz” of the financial markets to see what is really important to his or her financial life. 

This is the value our PFG financial professionals bring to the table. You cannot quantify it in dollar terms, but you can certainly appreciate it over time. For more information contact us here.

 

Citations.
1 – zacksim.com/heres-investors-underperform-market/ [5/22/17]
PFG Private Wealth Management, LLC (“RIA Firm”) is a registered investment adviser located in Tampa, FL. PFG Private Wealth Management, LLC may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements. 
Accordingly, the publication of PFG Private Wealth Management, LLC’s online material should not be construed by any consumer and/or prospective client as PFG Private Wealth Management, LLC’s solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice for compensation.
This information is provided for information purposes only.  Investments involve risk and unless otherwise stated, are not guaranteed.  Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy.  This material and information are not intended to provide investment, tax, or legal advice.
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Tax Cuts and Jobs Act: 529 Plans Expanded

In December 2017, the Tax Cuts and Jobs Act, a sweeping $1.5 trillion tax-cut package, became law. College students and their parents dodged a major bullet with the legislation, as initial drafts of the bill included the elimination of Coverdell Education Savings Accounts, the Lifetime Learning Credit, and the student loan interest deduction. Also on the table in early drafts of the bill was the taxation of tuition waivers, which are used primarily by graduate students and employees of higher-education institutions. In the end, none of these provisions made it into the final legislation. What did make the final cut was the expanded use of 529 plans.

Expansion of 529 plans to allow K-12 expenses

Under the new law, the definition of a 529 plan “qualified education expense” has been expanded to include K-12 expenses. Starting in 2018, annual withdrawals of up to $10,000 per student can be made from a 529 college savings plan account for tuition expenses in connection with enrollment at an elementary or secondary public, private, or religious school (excluding home schooling). Such withdrawals are now tax-free at the federal level.

At the state level, roughly 20 states and the District of Columbia automatically update their state legislation to align with federal 529 legislation, but the remaining states will need to take legislative action to include K-12 expenses as a qualified education expense and, if applicable, extend other state tax benefits to K-12 expenses; for example a deduction for K-12 contributions.

529 account owners who are interested in making K-12 contributions or withdrawals should understand their state’s rules regarding how K-12 funds will be treated for tax purposes. In addition, account owners should check with the 529 plan administrator to determine whether a K-12 withdrawal request should be made payable to the account owner, the beneficiary, or the K-12 institution. It’s likely that 529 plans will further refine their rules to accommodate the K-12 expansion and communicate these rules to existing account owners.

Please feel free to contact us if you have any questions about the new 529 Plan provisions.

 

PFG Private Wealth Management, LLC is a Registered Investment Adviser.  Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities product, service or investment strategy.  Investments involve risk and unless otherwise stated, are not guaranteed.